Cummins Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Cummins Inc. (NYSE:CMI) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 5.3% to hit US$8.8b. Cummins reported statutory earnings per share (EPS) US$5.26, which was a notable 10% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Cummins

Taking into account the latest results, Cummins' 20 analysts currently expect revenues in 2024 to be US$33.7b, approximately in line with the last 12 months. Statutory earnings per share are predicted to surge 95% to US$27.66. In the lead-up to this report, the analysts had been modelling revenues of US$32.9b and earnings per share (EPS) of US$27.54 in 2024. There doesn't appear to have been a major change in sentiment following the results, other than the small increase to revenue estimates.

It may not be a surprise to see thatthe analysts have reconfirmed their price target of US$308, implying that the uplift in revenue is not expected to greatly contribute to Cummins's valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Cummins analyst has a price target of US$349 per share, while the most pessimistic values it at US$246. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cummins' past performance and to peers in the same industry. We would highlight that revenue is expected to reverse, with a forecast 2.9% annualised decline to the end of 2024. That is a notable change from historical growth of 10% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cummins is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also upgraded their revenue estimates for next year, even though it is expected to grow slower than the wider industry. The consensus price target held steady at US$308, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Cummins. Long-term earnings power is much more important than next year's profits. We have forecasts for Cummins going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Cummins that you need to take into consideration.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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